tv Worldwide Exchange CNBC November 9, 2012 4:00am-6:00am EST
. this is "worldwide exchange." these are your headlines from around the world. >> china releases improved economic data on the second day of the congress. beijing inflation continues to cool. and we'll hear from the cfo of alliance. and credit agricole pay as steep price to exit greece. it posts a loss in its third quarter.
i'm afraid there's only one day left this week to enjoy the if stuff here on on "worldwide exchange." >> but there are two of us. you're back. >> i'm back here. eyes are getting better. >> glasses are gone. so on today's program, we'll bring you live updates from beijing as the chinese economy shows signs of improve. and we'll head out to washington for a view on how the handover of power in china will impact relations in the u.s. >> we're in london to talk about shipping trends. plus what will obama do about the looming fiscal cliff? we'll have plenty of analysis from commentators. >> and we'll hear first from the
cfo of aliance. but first day two data suggested growth is picking up and inflation is moderating meaning beijing may have more scope to ease if necessary. ppi industrial output and retail sales all came in better than forecast. eunice joins us from beijing. i'd hate to suggest this is quite good timing for this data. very convenient. >> what are you suggesting? a lot of people are saying that the numbers are showing the economy is bottoming out and a lot of people do use the numbers as a guideline at least.
they're saying the investment figures were encouraging. looking relatively strong. the government hasn't put up of much money in the infrastructure projects, so that's part of the equation here. other part is retail and consumption side actually look pretty good. numbers came in at 14.5% growth and that beat expectations. a lot of that was because people are buying more food as well as automobiles. now, the whole picture looks as though rebalancing of the economy is moving in the right direction. however, if you take a look at consumption as a percentage of gdp, it still isn't quite there and a lot of people believe that the next generation of leaders really needs to do more. this man and his family spend more than a third of their
$15,000 annual income on popular toys, clothing labels and electronics. china's consumers like to follow trends and fashionable goods, he says. i like to have what others have. the challenge for china's new leadership is to convince more people to be like him. the xi jinping is taking power at a critical moment. economists and policymakers believe the economy is at a cross roads and that xi will have to change the fundamental way that cli that grows. but it they rely too much oin investment and all the construction is pushing up debt and overcapacity. too much factories and empty apartment buildings. >> they have to stop investing. if they don't stop, in four or five years, we'll have a debt crisis. >> china needs to increase consumption, what economists call rebalancing p.
even though he shopping districts are packed with people, consumers are still not playing a big enough role in the country's growth. so what do observers say xi needs to do? push through major financial reforms. for example, stop punishing savers by controlling interest rates. drop import tariffs. whether that happens depends on the will of the new chinese leaders. >> today's chinese economy actually in many ways is more conducive to a new round of reform than ten years ago. what is looking today is conviction. conviction of leaders to push reforms. >> i'm in the too optimistic, he says p i feel the economic path
cannot stay the way it is. so for now he'll continue to save more than he dishes out. other encouraging data today, the inflation figures, consumer prices as well as producer prices looked relatively tame. so it looks as if inflation is under control at least for now. >> we did see the yuan appreciating against the dollar. what do you think they want to do with the currency? >> it looks as though they want to make sure that everything is quite stable, this has been a contentious issue between the u.s. and china. there are a lot of people take believe that the issue over the currency has really become overblown. because if you take a look at
where the currency was against the u.s. dollar versus wheres today, in other words, pegged at 8.3 versus 6.3 to the u.s. dollar, it's moved by about 30%. and the whole argument that the currency somehow is harmful to the u.s., a lot of people here think is really unfair because the trade deficit is really still a problem. another issue involving the currency, there are quite a few people who say even if you allow the renminbi to appreciate even further, it's knots as though those jobs are going to end up going back to the united states. a lot will know to other developing nations and not have an impact on the u.s./china relationship. so people keep thinking this is more a political football than
anything else. >> eunice, for now thanks. >> for more on the topic joining us is an economist with lombard street research. for you, good afternoon. thanks very much for joining us. so you look at the late he is figures and say yes to a hard landing but that it already happened. >> looking at the chinese data at the best of times, it's quite difficult to put it together in an arcadian picture, but that's what you have to do. q3 was a classic example. if you take the data at face value, of you have nominal gdp increasing 4%, but real only 2.2% ps, which means 8% inflation, which is 34r50e9lcom inconsistent with what we've got. basically what i'm trying to say
is that you have to look at this as an overall picture and we've tried put together the price indices to make a gdp deflator and use that to deflate the nomle natural gd pft. pe came up with 0.6% q1, q3 a bit of a pick up in line with the other data, but still only a rate of only 4%. so it does indeed look like they've been doing simulating behind the scenes. >> you guys have managed to decompose all the pigs to look apples to apples with a lot of other countries and you're talk about less than 1% growth rates in the first part of this year. now, again, it's no wonder perhaps the hang shy composite mass been so weak, but how fast potentially do you you see the
economy growing next year? >> next year? >> yes. >> for the next two to three years, we can't see the economy growing any faster than a% and that's because of the structural imbalances. we're talking about investment just can't lead growth anymore unless it's being pulled by the authority. it if you're in any anyway market oriented, you don't want to be invested in china at this stage. there is serious cash squeeze going on. at the same time, the lends rate is still very high even with the pick up we've seen in ppi data. so about 9%. basically all of the input for chinese enterprises are still
putting them under serious pressure. so investment complaint be leading growth at the moment inside it's pulled forward in the true old fashioned sense of china. >> it's a great pint because we're seeing announcements about rail infrastructure spending. and this cash flow problem for investors is a warning sign. what is to you, what are you looking for in the data that would make you more optimistic in investing in china? >> holding the economy under par is what would be needed. so there's no reason why china shouldn't return to reasonable fast paced growth. but for the molt, we still think it will be 5%. in terms of looking at the potential for china, pr cap take private consumption in ppp terms
is still only 8% to 9% of the u.s. and even lower figures for real net capital per capita. so in terms of the potential that that's definitely there, but there are some serious tough decisions and i wouldn't like to be the incoming leaders with the decisions they are he's facing. it's tied in with the political process, so it's a very difficult situation. we need to see reforms before the data can give us a more positive midterm view. >> okay. great stuff. thanks very much for joining us. right now it looks like we'll be down four out of five trading sessions this week. weighted to the down side. advancers being outpaced by decliners by a ratio of 6:3.
slim losses yesterday. ftse down a quarter, dax down 0.4, cac fairly flat. at the moment a quarter percent for the cac 40, ibex three quarters. yesterday with did see yields rising. a number of corporate stories. nor d nordis up. credit agricole is down over 5%. they're posting a 2.8 billion euro loss after the sale of the greek bank. lomid has rejected a takeover proposal from its biggest shareholder xtrata. a full year loss after six weeks of strikes continue to it take their toll. take a look at the bond markets.
down at a two month low at the moment. italy back over 5%. ten year hispanic yields nudging back up towards 6%. and euro-dollar bouncing off that 127.16 two month low that we hit during the session yesterday. not far above it, 1.2731. aussie dollar also coming back, 1.04 is where we trade at the moment. we hit the high on wednesday of 1.048 on. sterling-dollar below 1.60. so the dollar a little stronger against everything apart from the yen at the moment. and yields going lower. that's where we stand on this final trading session here in europe. what about asia? only one lady can tell us what's happened today. asian markets finished the week on a weak note, concerns
over the u.s. and europe. improving economic indicators failed to lift the shanghai composite. railway stocks and gold miners did well today, but brokerages lost ground. the hang seng finished in the red dragged lower by energy stocks in mainland banks pl julie tumbled over 5% after a warning. several brokerages raised their ratings on the stock. the nikkei fell for the fifth straight day in a row on the back of a worse than consumer sentiment down more than 3% for the week. the persistent strength hurt automakers and electronics. in south korea, autos and construction stocks weighed on the kospi and the bok kept its key rate on hold as expected. the aussie market also finished lower after the rba cut its growth forecast. most miners finished in the red. in india, the sensex still in action now lower by about 1%. but hopes of a stake sale.
orient express hotels rejected the bid. investors cheered the news after they worry about the impact of the acquisition on its balance sheet. ross, back to you. >> i'll pick it up now. any euphoria the obama administration feels could be erased by the thought of getting obama'sed edagenda through and divided congress. you can get more at cnbc.com. china is awaiting their new government and apparently expressing their envy of the u.s. democratic process. plenty more at changing china.cnbc.com. and also on the website, iranian warplanes fired an unmanned u.s. drone in international air space according to the pentagon. a formal warning was sent to tehran you through diplomatic channels. if the drone were hit it could have forced retaliation from the u.s. so against this backdrop, we want to know which of these
stories is most important for the months ahead or is it something else entirely that we're not yet focused on? join the conversation. firstname.lastname@example.org. tweet @cnbcwex. @kelly_evans. the @rosswestgate. still to cork we'll talk shipping trends with a guest who says the handover of power in china will be positive for global trade. [ female announcer ] the power to become a better investor has gone mobile. with features like scanning a barcode to get detailed stock quotes to voice recognition. e-trade leads the way in wherever, whenever investing. download the ultimate in mobile investing apps, free, at e-trade.
the danish shipping giant reiterated it profit will grow despite posting a disappointing set of results. the group says it will post earnings of around 3.7 billion in 2012. joining us is james leak to take a look at the shipping sector. what do we derive from that that about the rest of the have i? >> what we've seen are the results of successful general
rate increases imposed by the lines earlier in the year. q2, and that carried into q3. the box rate particularly on asia europe, asia u.s., collapsed quite considerably as we moved in to september. and so you begin see the lines defending their revenue by pushing through one round of general rate increases a month ago and it looks as if we're about to see another round coming through again. >> doesn't that ultimately -- don't they scare off customers her? >> i think they would say it's all about the service that they offer to the clients. what they've done successfully is cut back on on costs. certainly in terms of their vessels to reducing fuel, by laying up some of the older ships and bringing in more efficient vessels. so in that kind of arms race on certainly the major rooms that
they're certainly one of the winners. >> where are we with sort of dry bulk rates? in terms of the scheme of things over the last year and projected forward. >> chinese steel makers are taking advantage of perhaps relatively low priced alloy. those prices are moving p up again and at some point, those stocks will be replenished. so we don't see it as being a lasting recovery in that sector. however, we are looking towards the end of 2013. the rate of growth in the fleet is starting to slow. certainly there's a lot less new investment in tonnage at the moment. frustrated by the lack of debt finance and issues of profitability. >> where is the strength right now? as you mentioned, dry bulk still
a struggle, container business doing okay, but still trying to address overcapacity issues. what are the bright spots? >> interesting at the moment, you talk about the impacts of the change of guard in china, i don't think this necessarily has to do with the change of leadership, more long term investment if you look at the vlcc sector, it's struggled. we've seen earnings well below for a considerable part of that period. but we've got between half a million to a million barrels a day of new you refining capacity coming on within the next 6 to 12 months in china. the refinery in the states that did briefly come on fire, had the issue with a fire, that's coming on line in the the next few months. so we expect to see an uptick. and of course political factors. you see perhaps west african exporters like venezuela exporting a lot more to china.
so more long haul trade in that sector, as well. >> the demand for fuels is still there. and i wonder just to talk about what's happening with the container ships, we're heading in to the critical holiday season here in the u.s. there was so much speculation about whether people were delaying orders and if it does look in the trade figures that we're getting some of the even story in later than usual, that would suggest it's not necessarily going by ship, that it's going by air. >> that is certainly a factor. and i suspect there will be more going by air if they successfully push through general rate increases over the next month. but nonetheless, i think they will be successful in increasing rates for the short term. but i think theilem perhaps medium tier line of companies will start breaking the ranks. >> the commerce minister today says it's very difficult to hit their trade growth targets for
this year. so what are we pricing in in 2013? >> i think what we're looking at is a change of emphasis in terms of where china's export markets are. we've already seen let's say if you're looking at kimmer goods by volume in boxes, already the exports to developing economies have now overtaken that going to europe and the u.s. so certainly we're seeing an emphasis between middle east to south america and perhaps on the transatlantic rice. >> your favorite name in one word? >> most probably still is strangely offshore. >> okay. that's right. viewers, look it up. james leak, thank you very much for stopping by. >> thank you very much. walt disney's fourth quarter income jumped 14% thanks to growth from its theme parks and media networks after the media company announced a $4 billion deal to acquire lucas films and its star wars franchise.
revenue kass in at $10.8 billion, a little below analyst estimates of about 10.9. year it date the stock is up about a third. >> apparently hans solo might be coming back in star wars 7. luxury goods group has named two new ceos. a slow down in sales reported in the first half. although asian tourists continue to spend, a slowdown if domestic asia pacific markets hurt its performance. >> i just walk by and look at the window displays especially this time of year. >> someone might be tempted at some point if they see enough windows to go in. credit agricole shares are sinking in paris due to write downs on it assets in greece and
other charges in italy, france and spain. the group had a loss of 2.85 billion euros, revenues down 32% after booking a charge of almost 2 billion euros on the sale of its greek unit. stick around, because coming up in a little bit, german insurer allianz has maintained its 2012 targets despite super storm sandy. we'll speak to the cfo. >> plus coming up we bring you your very own blockbuster. [s
announces two ceos but admits to slowing asian sales. >> and credit agricole pays a steep price to exit greece as it takes a hit on the sale to alpha bank. britain's trade deficit narrowed a little bit more than expected in september. third quarter construction up, but also falling by an amount similar to earlier estimates reduces the chance of a downward revision to that strong third quarter gdp number, as well. so official data showing britain's deficit shrinking to 8.4 billion pounds in september. it was 10 billion pounds in august. the quarterly trade graph closed, as well. just for the record, economists were forecasts september goods deficit of 8.9 billion pounds. the overall trade deficit which includes the services sector also narrowed, as well, to 2.7
billion pounds down from 4.3 billion in august. sort of backing up that september number, backing up the third quarter gdp data, as well. just helping sterling bounce off the session low, as well. european stocks down four out of the last five sessions. slim losses for the ftse. xetra dax half a percent. >> bond market has had interesting moves. italian ten year has breached the 5% level which we've been watching for weeks. so pretty decisive move there through that mark. psychological if nothing else. spain meanwhile is moving up to 5.88% and that is the highest level we've seen in quite some time. no surprise the bund is benefiting. as a result 1.34%. so if you've got the 1.6 yield on the ten year in the u.s. was low, the german bund new yields 1.34%. >> so the two year went negative
again earlier this week. >> feels like summer all over again. >> meanwhile euro-dollar we hit 1.2716 two month low yesterday. not quite on it at the moment. around 1.2740 to be precise. dollar-yen slightly weaker. dollar up against everything else. now, european reinsurers including swiss re and munich re have largely shrugged off concerns over the costs of super storm sandy. even the primary insurance group allianz said sandy would not impact figures. next guest says the impact of the storm will be largely digestible for the industry. joining us is stefan. thanks for joining us. how much can we discount hurricane sandy and how much might it be of benefit in terms of helping to harden rates? >> well, as far as it looks now,
it's not really an event basically having a big influence on rates. we did have a lot of capital in the reinsurance industry and in that regard, plenty of capacity. so estimated 17 to 20 billion for insurance losses whether not really be enough to have a real impact on pricing. but i think psychologically, it will help to shape rates going forward and especially also next year into july with renewals in the u.s. and worldwide having a small positive impact. but generally the average reinsurance rate environment will not change based on sandy loss only. >> what's your take on the insurers generally speaking, do you like them as group, what are issues they need to face to see share outperformance?
>> it will some quite some time to get some decent estimates. there's uncertainties in many regards and clearly estimates my tend upwards from the current estimates. we just have had a down ground from a hurricane to a post tropical storm. that means deductibles for homeowners basically will be much smaller and losses may be higher. we also have business interruption basically going up. but for swiss re, we have around 400 million of net cap losses and now a budget of 1.4 billion for that. so it shows that fourth quarter will not be hugely impacted from the storm. the real issue for the industry is low interest rates.
recurring yields are coming down and the longer we have low interest rates, the longer recurring yields are really heading down to low levels and impacting roes. that's the real issue. >> travelers, primaries will take the biggest hit. how does that rebound in the likes of zurich and allianz on things like business interruption? sgt b sgt. >> the biggest exposure is allianz and zurich and they have 39% to 4% market range. allianz is a similar level. so both of them will have some impact. but both if we go up from current levels to more, reinsurance program will start to basically come more into
effect and bring more of the loss burden to reinsurers. but currently from a global perspective, reinsurers are maybe less concerned for these losses than the primary industry. and especially u.s. like travellers. >> how are these companies managing their investment portfolios? >> basically investment profile a little bit of government bond only to more equity, corporate bonds. just announced yesterday some small steps. and the better economic solvency the more they can basically risk the profile and potentially basically counter balance the low yields.
but generally there's a real challenge for yields for the general markets. so it's a tough game and you have to work hard on the technical side so it means reinsurance and insurance rates have some pressure from the future investment return side. that's partially why the sector has done well this year. >> stefan, thanks for joining us. good to talk to you. >> thank you very much. recorrected a proposal from extrat take to take control of the business while unveiling a $1 billion rights issue. earlier we spoke to the acting ceo and here's what he had to say. >> we have certainty around the funding of $800 million, 817 plld, and that puts the company on a very firm footing. so fully underwritten and we're
confident the plan on the table is one that will generate shareholder value. with regard to extrata, they haven't indicated their intention. >> in any case, s&p says it see as 15% chance the u.s. will go over the fiscal cliff next year. the rating agency however says policymakers are likely to compromise in time to avoid most if not all potential economic effects of that. meanwhile nonpartisan cbo says if america does go over the cliff, the economy will return to a recession and unemployment will go over 9%. joining us now with the european perspective is an draw balls from pimco. andrew, good morning. we've spent so much time talking aboutdraw balls from pimco. andrew, good morning. we've spent so much time talking abouteaw balls from pimco. andrew, good morning. we've spent so much time talking aboutw balls from pimco. andrew, good morning. we've spent so much time talking about the fiscal cliff. what outcome do you view as most likely? >> the biggest risk is gridlock. we stau last summer when the
u.s. was downgraded by one of the ratings agencies. so that's a big race. and related to that, even with the relatively benign outcome, this is a very difficult dispiriting process and kind pact confident business investment. >> why does it matter if the u.s. is downgraded some we've seen it before. >> i don't think it necessarily matter, but the process last year of gridlock, those real costs to the u.s. in terms of the impact on confidence and the grove of the economy. so another period like we saw last year of gridlock and the inability to get anything done i think could again lead to a hit to confidence. >> has it affected your investment decisions, have you shied away from the u.s. at all because of these concerns or has just worsened some of the macro view in europe?
>>. >> we have a below consensus growth forecast and part of the reason for that is the expectation of the fiscal cliff impact on growth. europe is another significant risk, as well, so two big sources of risk slow down in china, as well, it's a fairly difficult global economic outlook. it would be great if u.s. politicians could come together and sort out this issue. ben bernanke would be very pleased. baseline would be avoid the full force of the fiscal cliff which would be a very recessionary event. but there's a lot of risk, a lot of uncertainty in getting there. >> and this morning we're seeing the italian ten year back above 5%, german bund rally to 1.34%. do these moves, do you sort of chase these moves or do you see them as buying opportunities or selling opportunities conversely? >> so i think if yields continue to back up italy, spain, then, yes, i think that would be a
buying opportunity. you have a standoff in europe. you have the european central bank has pledged to be a lender of last resort. very important, very powerful. we covered our big underweight during the summer. the ecb hasn't bought a single bond and greece continues to be a problem. so a lot of uncertainty. it's not clear whether the markets will continue to be satisfied with the potential ecb role or whether markets will test spain and test the overall european argument again. p. >> andrew, may not be the easiest yes to answquestion to respect but what is the biggest driver the rest of the year, debate over the the fiscal cliff or continuing economic decline in europe? and we're still actually haven't agreed to pay out to greece yet, for example. >> so i think that the most likely event is that they continue to kick the can down
the road on greece. so there's risk around that. but i don't think probably greece. europe, we have the big summits coming up. what we'll look for there is can they continue to make progress or do we have again com play answe complacen complacency. but i think the number one is the fiscal cliff and whether the two sides in the u.s. can come together and make an agreement which is in everyone's interests or a rerun of last year's events where politics dominates everything else and gridlock and potential economic impact. >> i just go back to wednesday when we had a big stock market move and whether that was more down to concerns about fiscal
cliff or whether that was draghi saying european commission had down graded its forecasts. it seemed like the european news was more of a driver. i may be wrong. i want you to tell me. >> from our point of you view, the u.s. election outcome was exactly what we expected. it's no surprise that germany is being negatively impacted by what's going on in europe. this is the biggest export markets. our expectation is that germany will pretty much flat line over the next four quarters. it's hard to many sources of growth in the eurozone. and trying to do it amid flat growth or recession is awfully difficult. >> andrew, good to see you. have a good weekend whenever it starts.
what one nation's waste could be another's growth driver. the nikkei has more for us. >> yeah, japan's household garbage may be the solution to the electricity shortage. the government plans to introduce a subsidy aiming to increa increase. japan has 20 million tons of food waste that goes to landfills. that could provide 5% of the nation's electricity. it may be able to triple the amount of bios mass generation by 2030. a big reason for the push is because japan needs to reduce its reliance on expensive oil imports. back to you, ross.
>> okay p thank you. let's take a look at what's on the agenda in asia when we come back on monday. the party congress continues. we'll likely hear from chinese leaders on the economic reforms. and japan will release third quarter gdp figures. analysts expect the economy to show a sharp contraction. india will post a key piece of data which are cpi figures for the month of october. >> plus he has the most liked picture on facebook, the most retweeted twitter post of all-time. barack obama at any time just win t didn't just win, he powered ahead of mitt romney. >> thought it might be you there. we want to know if he set a new agenda for presidential campaigns in the future.
and it's been retweeted half a million times. >> do you think he actually pushed the tweet button? >> twitter doesn't let you to that anymore which i found out when i tried to -- >> what do you mean? >> it only counts -- >> he it actually didn't -- >> oh, tweet it in the first place. no, they probably have a team of people. >> that's what i mean. >> so to say that he tweeted is not factually correct, is it. >> thank you for catching that. norm johnson is here to talk about just how as we were discussing, how candidates use social media. and to you you think the way in which obama used it helped his re-election? >> ross, first of all, i think it was his kids that tweeted it. that's the trick that i use. but i think it certainly helped.
if you look at the power of word of mouth particularly for those that are undecided, that haven't decided which way they want to vote, social media is an incredibly powerful tool. if you look at the numbers, obama doubled the number that romney had in facebook, twitter. and then his ability to really activate those people to -- >> i was going to come on to that. how much of the fact that he won 60% of the 18 to 24-year-olds, how much of that actually comes down to the fact that actually maybe he's doing better on social media sites where that demographic clearly will be big? >> if you look at that demographic, they spent a significant amount of time in social networks. this is where they communicate with each other, with friends, with politicians. so it's absolutely critical i think to have a social streenlg in play to activate that
audience. 20% of them recommended a politician, a presidential candidate to the friends. if you have 130 friends within your social graph, that's quite a few people that you're getting to and i suspect some of those are undecided voters. >> what's interesting is the reports -- republican ares actually use a lot of additional media to follow, but is that all they're doing, following, not there necessarily engaging in recommendations? >> i think it moipts to a failure within the romney campaign to activate those people and get they will engaged as advocates. it's either indicative of romney the candidate or their inability to use social networks to get the word out. >> i would imagine the differentiating point is more of the that will support so the youth demographic for obama being more inclined to be on social media, but if you're suggesting that the gop base is the more active one,
perhaps it's not strictly demograph demographics. >> i think that is true, but the obama campaign overall, they spent twice as much money on digital marketing than the romney campaign. >> so social media advertising is important for companies. you're saying it pays off. >> if you sort of look at what obama's done, and he was used by a lot of companies how to approach digital marketing, and the numbers of scale is even beggar. if you look at election eve just last tuesday, 2008, 1.8 million tweets. there were over 30 million tweets alone on tuesday night. >> would romney have done better to have spend less on tv advertising and more time social
marketing? >> i think it's about getting twot to work together because the data we have people watch more tv than ever before. so particularly for presidential campaigns, news, tv new, online news is really critical to influencing people. so it seems a failure in their tactics, the ability to get those things to work together to get people from tv to online and i think if you look at romney, the unfortunate situation there for him was that social amplified his mistakes. so if you look at the biggest statement he had on twitter, biggest mentions that romney had was the data 47% video was released online which was then followed for women full of binders and big bird. so it seems to be it was amplifying his mistakes learn being uses to get positive word of mouth out there. >> and it will play a huge role in 2016. >> i think there will be a lot of lessons coming out of the
republican camp and one will be they have to pay much more attention to social marketing. >> norm johnson, thank you for coming by. now, a winter storm in the u.s. has dumped a foot of snow over parts of the northeast. new jersey and new york have been particularly hard hit by the storm. it's led to knock effectses in neighboring states including massachusetts, connecticut and rhode island, as well. and this just of course after super storm sandy caused so much trouble. power outages in some parts of the tri-state area may not be re-established, power may not be re-established that is until thanksgiving. meanwhile with the election in the u.s. and the transition in china the focus this week has centered on the world's two biggest economies. both face huge challenges. the u.s. with the it is fiscal cliff, china 23450needs to bala its growth. here's a comparison on how the two stack up. >> how do the world's two
biggest economies stack up in terms of numbers? we are looking at gdp in terms of purchasing power parity, china just over 11 trillion. united states 15 trillion. remember, the figure will be far higher if we were comparing the net nominal levels. and take a look at where per capita gdp stands. 8549,000. what is interesting to note is that hu jintao is saying in his party congress speech that china will double the gdp growth rate within the next ten years. so for the first time, a chinese explicitly spelled out they do the same with per capita income levels, as well. on the urban side, we're looking at somewhere around $3,000 and actually on the rural side, there are huge disparities, in fact just a quarter on that. so how that changes within the next ten years will be very crucial in changing the business landscape, as well. take a look at how the top five companies stack up over in the u.s. as well as china. what is very, very striking is
that you have a lot of private enterprises dominating. apple, exxon, wall mrt and microsoft. china, all five are in fact state run. pet control china, china mobile. and we should highlight china mobile has mobile subscriber, about 700 billion. china's internet penetration rate only 40%. and yet we have china has in fact more than a billion mobile phone users. so how china changes certainly remains to be seen. [ female announcer ] e-trade technology can help make you a better investor. our e-trade 360 investing dashboard shows you where your money is, live. e-trade pro is so usable you'll actually use it. and our apps are the ultimate in mobile investing. become a better investor at e-trade.
welcome to "worldwide exchange." these are your headlines from around the world. china releases a spade of somewhat better economic data for october on the second day of the communist party congress. beijing could have more room to ease as inflation cools down. >> obama gets set to make his first statement on the deficit since re-election as a new study warns the looming fiscal cliff may push unemployment over 9%. >> allianz maintains its full year target despite the potential impact of super storm sandy. that's on the back of solid quarterly results. we'll hear first from the cfo in just over an hour. >> and the swiss lushry goods maker announces two ceos.xury g
maker announces two ceos. we're expected to open higher. the dow would add 20. 1377 is the level we're seeing on the s&p 500. i mentioned holding the lows because yesterday we did breach the 1381, 1383 level that people were watching. the 200 day moving average just to indicate generally speaking where the momentum is. we have breached these lows before back in june. that turned out to be the lows for the market this year. the question this time around is whether similarly we're putting in lows or whether there's more ugly market action to come. we can take a look at what's happened across europe. ftse 100 down a tenth of a percent, xetra dax 0.4%. ibex 35 shedding 0.6%.
and this comes as we have seen a shift towards risk off. >> let's show you what's happening in the band space. yields are lower in germany and the u.s., as well. ten year down 1.34%. two year went negative again earlier in the week. ten year spanish yields lower from where we were. ten year treasury yields were yielding 1.6%. slightly above that at 1.61%. but never the less still an ful lower than they have been in terms of yield, as well. let's remind you you where we stand with the currency markets. euro-dollar 1.2741. dollar slightly weaker against the yen.
trade gap narrowed a little more than expected it for the month of september. let's recap the end of the trading week in asia. >> asian markets wrapped up the week in the red. moderate china inflation data and improving economic indicators failed to inspire the shanghai composite. railway stocks outpurchased. index lost nearly 3% on the week. in hong kong, losses in energy stocks and mainland banks pushed the hang seng lower. it's down over 3% this week. the nikkei fell for the fifth straight day on the back of the worsening consumer sentiment. it's also down more than 3% for
the week. yen persistent strength hurt automaker. the aussie market also finished lower after the rba cut its growth forecasts. most miners ended in the red. the sensex lost 0.9%, but united spirits gained on the hopes of a stake sale. back to you, ross. >> 15%, these are the odds the s&p puts that the u.s. will go over the fiscal cliff next year. they still expect a compromise. meanwhile the nonpartisan cbo says tax hikes for the wealthy won't hurt economic growth but warns if america will sg go over the cliff, unemployment will go over 9%. president obama is scheduled to make his first address to the public since his re-election at 1:00 p.m. eastern from the white house and, yes, it is regarding the economy and the deficit.
joining us is paul dales from capital economics and sean sullivan a reporter at the "washington post." thanks for joining us. so we'll hear from the president today. what does he need to say to avoid the worse i guess effects of going over this cliff? >> it's pretty near it needs to be a bipartisan agreement to avoid this recession happening. the democrats need to forego the higher taxes in exchange for the republicans deciding to prevent spending being cut. so i think obama will probably make some kind of conciliatory comment to that effect that he's willing to go some way towards a deal. so i think hopefully we will prevent this cliff from happening. >> can i make a confession?
i have fiscal fatigue. i'm so tired of talking about the fiscal cliff and i wonder given how much we've already discussed it, now that we're entering this critical period, to you get the sense perhaps that there is fatigue broadly speaking some is there another urgency, is this big scary event that everyone makes it out to be or did we all know we were going to reach some sort of ugly compromise? >> it has been hanging around for a long time. but is it important, yes, it is. if the full cliff hits and the u.s. falls off it the u.s. will go back into recession. it will take 3% off gdp growth relative to what would otherwise happen. so it is a massive issue. and i think there is going to be enough urgency to solve it because no one wants to send the u.s. back into recession. >> sean, what do you expect to hear from the president today?
>> it will be interesting to see whether he holds the line on whether tax increases are the answer here. you know, democrats have been clear about their decision to let the bush tax cuts on high income earners expire. what we heard from john boehner, the house speaker earlier this week, sort of conflicting remarks on whether p ares would be open to tax increases. the day after the election, he said that revenue increases might be a possibility, but then in interview yesterday, he said basically we're not open to tax increases. so it will be interesting to see how much of a focus the president puts on the issue of revenue increases in his remarks today. >> what impact has the election had on the hard liner republicans? has it made them more malleable? >> it certainly looks like it has early on here.
the tone in washington is we lost the election, mitt romney did not win, the american people have spoken. we have to work with this president the next four years and that's different than what we've seen the last year and a half which is we want to do everything we can to make this president a one term president. now that that's not going to happen, republicans don't have much choice, they have to work with this president and the tone here is very different so far than what we saw the last year. the question is that stotone is going to stay or whether the new tone is here to say. >> what's the dividing of the tea leaves that well get some kind of deal struck even though it might be protracted and linger towards the end of december? >> my read is we'll see something similar to previous discussions over the debt. we'll get an 11th hour deal. might punt it into the new year or something temporary. both sides won't get exactly what they want. so nobody's really going to be
happy, but they'll get something done because the stakes are new high before you have the president kicking off a new four year term, you have congressional republicans trying to put a new face on on this and move forward after the election. so there's too much the at stake for either side to say we can't get anything done. >> the longer it takes, the more it will stay weigh on business investment. sean, thanks very much. >> i can guarantee you we'll be talking about this next year. >> thank you. we'll also be talking about this, day two of the communist party congress. inflation is continuing to moderate so beijing has more scope to ease if necessary.
eunice doing a great job this week. good to see you. we seem to have a problem with eunice. we'll re-establish contact with her. >> and any euphoria the obama administration feels could be erased by the thought of getting agenda through a divided congress. there's plenty more on on your money your vote over at cnbc.com. china is awaiting their new government and apparently expressing their envy of the u.s. democratic process. head to cnbc.com, changing china. full coverage on the website.
you're watching "worldwide exchange." china releases improved economic data for october on the second day of the communist party congress. >> obama gets set to makes his first statement since re-election as a new study warning the looming fiscal cliff may push unemployment over 9%. >> and allianz says it's not feeling the impact of sandy just yet. the insurer maintains 2012 targets.
beijing has more scope to ease if necessary. ppi industrial drought put, retail sales all better than forecast. eunice, good to see you. all this better data, on the day we get the part i congress out. that's very handy, isn't it? >> it is and i'm glad that i was back. i was frozen before and getting worried that the chinese government was trying to censor move. a lot of people here believe that the economy has bottomed out. fixed asset investment as well as the factory output came in quite strongly.
so a lot of people are saying that that part of the equation, the investment part, came in quite well. and the other side of the equation which a lot of people are hoping will grow is the consumption element of the economy. and retail sales numbers came in quite healthy at 14.5% growth. that actually beat analyst expectations, also a lot of it driven by sales of food and automobiles. people are saying that we're really starting to see some rebalancing here, although of course consumption still as a percentage of gdp is just not quite there. now, another component that people are looking at is that the inflation figures, both consumer price figure as well as the producer price figure both came in relatively low. so people were feeling pretty good that inflation is under control and that it could give the government here some room to stimulate the economy. and if they indeed choose to do
that. >> okay. eunice, good stuff. i'm pleased we reconnected the line and you weren't frozen out. >> had the biggest opening ever for a bond movie and now after bringing in nearly $300 million in just two weeks -- >> sky falls in authority america, but if you'reinspired, you can learn the skills associated with spies in the real world. i went to find out if i can be shaken or stirred. >> there's bond fiction. and now there's one of bond fact. live weapons training. unarmed combat.
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there. >> yeah. you have to be careful now what you you say. >> allianz has confirmed its full year targets. this despite the potential claims impact from hurricane sandy. the german listed firm raised its profit targets for 2012 at the end of last month. joining us on the phone from munich is cfo of allianz. oliver, thanks very much for joining us. good morning. let's start off by talking about perhaps the biggest underlying challenge for your business. low interest rates. if anything, we're seeing that reiterated this morning. what are you you doing to offset this long term? >> long term, we have an van that nobody else has. we have pimco in our group which is the world's best bond makinger. since most of our investment and fixed income having strong bond
management capabilities are of the essence, so that's helping us. number two, we are refocusing our product suite to get redu reexposure to expensive interest rate guarantees and strengthening our mar beggins i order to support the fwhis a low interest rate environment. >> what are your most profitable products? >> they depend on the line of business. we have three segments, property, casualty, life insurance, asset management. margins are very strong. also life insurance, we have in our core markets very good profitability. property casualty side, almost every business is doing really well with the exception of our u.s. restructuring case for the next 1 months. >> you have reshurnlinsurance co
cap your exposure. how high or low is that set? >> we don't disclose because they have an effect on the market, but we have various mechanisms that lemt oimit our sures and make them manageable. even with high estimates, allianz will maintain it outlook. >> you still hit your earnings target. >> yes. now, of course we have eight weeks to go. if we have another sandy or if we have government debt crisis reoccurring, things might change. but given where we are, we are confident to hit our outlook. >> before sandy hit, there was report citing climate change as a reason for increased costs in the u.s. you mentioned your own restructuring efforts there. are you willing to acknowledge that there's been enough of a change that it's affecting your business? >> yes, it is affecting our business. it's affecting everybody. and i think there's a lot of things that need to happen.
we need to strengthen infrastructure. you can see on the east coast that while people are doing a great job, infrastructure investment certainly has not been enough in order to deal with higher severity and higher frequency of natural catastrophe events. and we also have to do something on product design and covers for our client so we can protect them better against the much higher level of damage that will occur also in the future. >> and what about dividends here? we know that rates could be headed up at the end of the year. are you going to accelerate payouts either before that or just in general? >> it's too early to say. what's very important for us, that our investors can count on allianz maintaining dividend continuity. that's our objective. >> okay. oliver, thanks for joining us. dow jones very briefly saying the eurozone has not yet reached consensus on the two year 2k3 he thinks extension for greece.
>> a lot of discussions moving markets. bottom line is people are nervous about spain and greece and that's having an impact. >> and here are the headlines today. >> china releases a spate of improved economic data from october. beijing potentially has more room to ease as inflation cools. >> president obama gets set to make his first statement on the deficit since re-election as a new study warns the looming fiscal cliff may push unemployment over 9%. and allianz maintains its full year target despite the impact of super storm sandy. as we just heard from the cfo, they've reiterated their 2012 targets. >> plus two new ceos at richemont. but admits to slowing sales.
in china, they've started the process of the new leadership coming in and we'll find out more detail next week. but what we know is the challenges are enormous for whomever it will be. >> so we thought we would compare some of the stats between the two companies. china, gdp 11.44 trillion. that was estimated 2011. per capita gdp, 8.5.
internet penetration, 40%. how does that compare with the united states? >> in the u.s., no surprise still it has bigger economy, it has much larger per capita gdp, although it has about half as many internet users given the population size perhaps not a huge surprise there. internet penetration rate is still double. >> petrol china just under 250 billion and then china mobile. big drop down into the likes of sinopec. significantly undervalued compared to some of these big beasts over here. >> those numbers on the right show in china, only the top two companies there are among the world's biggest top ten. in the u.s., all five of them are. even general electric, the fifth biggest company by market cap in the u.s. still one of the top ten companies in the world. the largest apple of course.
this valuation has fallen significantly, these naums these as of october. you can see the market capitalization of these companies in the u.s. for the most part still trumps china. so what about the leadership transitions and where are we headed? joining us is professor at the maryland school of public policy. s also former assistant treasury secretary for economic policy and he's co-authored the book embrace the united states and china. >> he's done a lot. >> thank you very much for joining us. you call it an awkward embrace between these two nations. what do you see as the biggest challenge for them policy-wise as both leaders transition? >> we have a productive and mutually beneficial economic relationship. on the national security side, we're butting heads. we see what they're doing with
japan and philippines, their quest for energy leading them into iran and sudan. and that's the challenge. how can we continue the the economic benefits and help them make the transition they need and sometimes containing them in security. it's almost the cold war term of containment is coming close to being a reality. >> and we see the numbers that ross was just reading off that china still has significant space to ramp up the economy to match the size of americas. that would seem to imply its military which is already nearly the same size. >> china is big country and a regional power. the question is what is their intent. as they get rich, do they become part of the international security system or become more threatening. and that's what people are looking if at the new leadership. how do they feel about the west. and unfortunately it looks like the new president is very familiar with the u.s. and is very comfortable with the west. >> although decisions are made
collectively, as well. so is it down to one man or the collective? >> that is a yes. it's difficult to tell who is on for that hu's presidedecessor, there's a question who is on top. it would be good for china to get them back on to a track of making the changes that they need in their economy and being a constructive partner for the united states. >> is the biggest challenge in some ways in terms of relations between the u.s. and china going to be what happens in thedy essential over the islands with japan? >> absolutely. i see dispute with japan is an indicator of what might happen. if things go badly in china, the leadership is a new leadership
and will look to rally national sentiment. so what's going on with japan in the islands is a sign of things to come that's why it's in both interests to make the transition to shift from investment led growth to a more consumption led growth model. >> and is it going to comatethe perhaps its biggest and foreign policy challenge will be the middle east, is going to potentially be iran? >> absolutely. what can we do make them be more constructive there, not support iran, but to lead to a change there. >> phil, thanks for that. he's written loads of books. let's show where you we stand with the u.s. futures right now ahead of this particular market.
right new pretty flat the open for the s&p 500. the nasdaq is around five points above fair value and at the moment, we are five points below fair value for the dow. so looks fairly flat. european stocks down most of the session. bond yeeds certainyields certai looking at. >> if we look at the bond space, we can get a sense of why the italian ten year, this is the one to watch breaching the 5% level today. it has come down a little bit from the session high. perhaps indicating something of a floor below the market levels that we're seeing this morning. but certainly one to watch as we continue to gauge fallout across the eurozone as to whether greece ahead of budget negotiations this weekend and spain too importantly will request for aid this year speaking of spain, 5.87% the
yield today. now below 1.6%. and the german bund also benefiting. we are seeing that at 1.3%. quick look at forex. euro dollar no surprise, down 0.2%. still to come on the program, it was a disappointing quarter for groupon. shares sliding in after hours trade after revenues disappoint. we'll have all the details when we get back.
any euphoria the obama administration felt could be erased about the thought of how to get agenda through a divided congress. top of the agenda is the fiscal cliff. we have more coverage of this on cnbc.com. at the same time, china is awaiting their new government and expressing their envy of the u.s. process. we also have full coverage of that transition, as well. and also getting lots of attention, iranian warplanes fired at an unmanned drone. a formal warning was sent through diplomatic channels and if the drone was hit, it could have forced retaliation from the
u.s. so no shortage of pressing foreign policy challenges on the agenda and we want to know which of these should be top notch for investors. that is top of the attention for investors in the months ahead. join the conversation here, let us know if it's one of these. if it's something else we haven't discussed, then you can respond to anything else you've heard on the program, as well. email@example.com, @cnbcwex. meanwhile not the best times for groupon. not that long since they floated and the shares have hit an all-time low. down after hour, up 4% during the session yesterday. but they talked about a net loss of 2.98 million. and the company suffering -- i don't know if we have a frankfurt quote. richmonte is the other company we're looking at three month stock as well today, down 1.4%. this is the luxury goods group
this morning posting a six month profit of 1 billion euros. there are concerns about maybe that sales growth is slowing. and they've now pointed two ceos. joint from april the 1st. i'm not quite sure whether joint ceos work out. if you're just joining us, these are your headlines. china releasing a spate of improved economic data for october on on the second day of the communist party congress. obama gets set to make his first statement since re-election just as a new study warns the looming fiscal cliff could push unemployment over 9%. and allianz says it's not feeling the impact of sandy yet. the insurer reiterates its 2012 targets.
priceline has agreed to buy rival kayak for $1.8 billion in cash and stock. the deal comes just months after kayak had it own initial public offering. $40 a share in cash and stock, 29% premium to thursday's closing price and 54% in kayak's listing price. >> winter storm in the u.s. has dumped over a foot of snow over parts of the northeast that were just hammered by super storm sandy. new jersey and new york have been particularly hard hit by the storm. lead to go knock-on effects in neighboring states including massachusetts, connecticut, and rhode island. and also furthering the you power outages that have plagued the area now for several weeks. >> and from today, drivers in new york city have to check their number plates before they pump gas. the mayor says based on license plates ending in odd or even numbers, drivers will be allowed to fill their tanks on alternative days. three quarters of gas stations remain closed due to super storm sandy. and in the last few minute,
drinks giant has signed a deal to control spritz for $2 million. joining us is the ceo before paul, good to see you. thanks for joinings us. i presume you you now have to make an offer to all the shareholders. >> we are required to do a mandatory tender offer in the market which we will embark upon upon appropriate clearances. >> what is this company going to give you that you don't already have? >> first of all, this company has fabulous brands in the premium local category. it also has a very strong route to market. so it is the leader in the market and as you said, we'll have controlling interest. >> did this basically happen because united spirits owner needs cash? king fish airlines has been grounded by heavy debts. >> i think they see the mayor receipt in what we're trying to
create here. what we're involved in is quite separate on to his other interests. >> and i wonder how worried you might be about india's tax laws and in some ways the way the government has pursued multinationals. any concerns on that front? >> i would hope india government sees this as a capital infusion in on to their economy. these are local products. we will have local shareholders. and therefore i would hope that we have a harmonious relationship with the government. >> how will you work their brands with your brands? you're saying johnny walker. they have their own brands. how will you blend the two together? >> the first thing we'll do is keep the businesses separate. we will need to get appropriate clearances and then need to better understand from the inside of the company how to tap into their route to market. and then progressively we will
explore how to leverage the two portfolios. >> you've talked in the past, we've talked about how you want to earn half the revenue from developing economies by 2015. where does this deal take you on that target? >> if you saw the numbers on the back of the deal that we've done in brazil and with a we're doing in china, this gets us very close 50%. >> what's the key to cracking a deal in india? you've been talking to him since some people said 1998. is that right? >> these things do take time, but this is an industry where you have discussions all the time and explore opportunities. sometimes they come to fruition, sometimes they don't. but this is a traction that we've been keen to pursue and
i'm delighted that we can now have this partnership about that. >> and one more point when it comes to india, we also know they have high excise duty, import duties. especially in the case of spirits. would you like to see those reduced, is in a an important part of the future for the spirits industry in that country? >> i would certainly like to see those exice tax levels and import duties reduced. i believe that would make the global brands far more accessible to the consumers in india a. so that would be good and part of free trade negotiations that would be ongoing, but i'm optimistic, yes. >> we'll leave it there. >> paul being ju, just before w u.s. is done and dusted. we're now waiting for fiscal cliff. give us your sense of the u.s. economy and political scene. how does that impact what you're doing? >> well, first of all, it is the
economy that impact what is we're about in the u.s. we have very strong market shares there and the u.s. economy is definitely on an upward 2r5 jtrajectory. i just hope and believe that that will ten so i'm positive about the u.s. >> okay, thanks for joinings us. coming up, we'll be live in chicago. plenty coming up on the docket.
economic growth. if america goes over the fiscal cliff, the economy will return to recession and unemployment will go over 9%. president obama is scheduled to make his first address to the public since his re-election today. 1:00 p.m. from the white house. and it will be regarding the economy and the deficit. so joining us to make sense of all of these various cross currents is todd horowitz. todd, on top of investors minds
is whether dividend rates are going up. >> you know, dividend rates are going to do what they're going to do. and they're going to solve this fiscal cliff. this is again another employ between the two parties waiting until the last minute and they'll ride in on the 11th hour and say we've solved the problem or we'll kick the can down the road for another couple of years. this is not going to be an issue. the market is telling you you that it's not going to be an issue, that it's pricing in still that there is going to be a solve to this. >> what about the dividend rates? how much does this matter? if it's 40%, we've seen 40% before. we saw it in the mid-90s. their suggestion from the senate working group that perhaps it will only be 20%. so how concerned should investors really be? >> i don't think they should be concerned at all. i think a lot is rhetoric. i think we'll continue to get the dividends and i think the
crux of the american market, that's how people are able to develop investment plans and i think that we'll stay pretty much the same as we are now. >> todd, we're seeing ten year treasury yield below 1.6% here as we go through you european trade. what do you think of that? >> you know, it's amazing because the overall selloff in the general market has been very qui quiet with lack of fear. but we've had an explosion in the 30 and in the 10. >> what about apple? 20 percent correction. >> apple is in its own personal bear market right now. great strides going forward. i think we'll probably settle down somewhere around here.
i'm not looking for any major rally. i thought that apple was a little bit heavy and on its way down. i think it will probably find some level here that will make it settle and we'll get some movement, but i'm not looking for a major move to the up side either. i think that it's probably going to steady and level off down here. and the rest of the market i think is trying to catch down with it right now. >> and what about that momentum? yesterday we did see the s&p close before the 200 day moving average, sitting about ten points below those levels today. in june when this happened, it was more of a bottom in the market than anything. is that how you interpret this latest move or will we have to wait and watch today to find out? >> i think that you'll see we're going to most likely get a bounce from here. is this the true bottom? i really can't say that. but i can tell you i would like for what we would call a dead cat bounce off of this level here. the market has come down with no fear, no panic. volatility is still low. i think we're probably more range bound somewhere between the 1370 and 1430 in the s&p.
remember, we're coming into also a very bullish time of year. typically we get the santa claus rally coming in anytime here now. so i think after this initial news has played out the next couple day, i think we'll probably start to see a little bottom put in and a rally. i wouldn't expect this to go past 1410 in the s&p because i do think that we're going to have some sort of correction, but i do think we'll probably have a temporary bottom here. >> todd horowitz, thank you very much for joining us this morning. and that's just about it for this week here on "worldwide exchange." plenty more to come with "squawk box." also coming up later today, jamie dimon is sitting down for an exclusive interview on closing bell. so don't miss that either. 3:00 p.m. eastern. s people really love snapshot from progressive,
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. good morning. today's top story, the global markets. u.s. is to bes continue a post-election selloff. the dow, s&p, nasdaq and russell 2,000 are all now below their 200 day moving averages. fiscal cliff fears still around. newly reelected president obama plans to speak on the economy today. and in corporate news, shares of disney fell in after hours following quarterly results. meantime shares of something called kayak spike after priceline announces it's buying what apparently is a travel site. it's friday, november 9th, 2012. "squawk box" begins right now. good morning, everybody. welcome